Microsoft’s new CEO explains why dumping the Xbox would be incredibly stupid

It’s sort of sad that Microsoft has to defend keeping around its most popular consumer product to Wall Street analysts, but apparently it does. Late last year, Normura analyst Rick Sherlund and Microsoft cofounder Paul Allen called on Microsoft to dump the Xbox because it was a persistent money loser for the firm. However, in his new manifesto sent out to Microsoft employees, CEO Satya Nadella spends a good chunk of time defending the Xbox’s place in Microsoft’s product line and explains why keeping it around is hugely important to the company’s future in consumer electronics.

“The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming,” Nadella writes. “We are fortunate to have Xbox in our family to go after this opportunity with unique and bold innovation. Microsoft will continue to vigorously innovate and delight gamers with Xbox. Xbox is one of the most-revered consumer brands, with a growing online community and service, and a raving fan base.”

This is all true: Even though the Xbox One has been getting outsold by the PlayStation 4 so far, it’s hardly a flop and it still has a big and loyal following among gamers. But Nadella also makes the case that the Xbox is important to Microsoft for reasons that go beyond its appeal to gamers, largely because the technology that the company has developed through the Xbox is now being used in other Microsoft products.

“We also benefit from many technologies flowing from our gaming efforts into our productivity efforts – core graphics and NUI in Windows, speech recognition in Skype, camera technology in Kinect for Windows, Azure cloud enhancements for GPU simulation and many more,” he explains. “Bottom line, we will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft.”